Citigroup transferred $ 500 million by mistake. What if they move you?

New York (CNN Business) – Citigroup lost a court battle Tuesday to recover the $ 504 million it had mistakenly transferred to Revlon’s lenders in August. But don’t be under the illusion that you can keep some money if you accidentally transfer to your bank account.

A federal judge ruled that wire transfers made by Citi, who was acting as a lending officer for Revlon, were “final and complete transactions, and not subject to cancellation.” However, in most cases where electronic transfers are received in error, this does not happen. In fact, you will have to return the money or face criminal charges.

This is due to the common law principle known as “unfair enrichment”, which generally requires the recipient of mistakenly transferred funds to return the money to the sender. A Pennsylvania couple faced criminal charges in 2019 after spending $ 120,000 mistakenly deposited into their account.

But there is an exception that applied in Citigroup’s case under New York law. This law was introduced through a precedent in a 1991 case in which the New York Court of Appeals ruled that if a third party mistakenly sent money to a creditor, the creditor could keep the funds.

This exception, called the value adjustment rule, allows the recipient to keep the money mistakenly transferred to him if the funds transferred were not requested in error, covers valid debts, and the recipient is not aware that the payment was made in error.

This was the case for Revlon’s lenders.

US District Court Judge Jesse Foreman said in his decision: “The Final Value Settlement defense is based on whether the defendants (or more precisely, their clients) had received notice of Citi’s fault at the time they received the wire transfers on August 11th.” . “Based on the reliable testimonies of the defendants’ employees and the documentary record, the court concluded that this was not the case.”

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Revlon’s lenders stated that they believed Citibank’s transfers were prepayments on a pending loan, which was not due to be settled until 2023. The judge said: “The transfer was a penny with the principal amount of the loan and the interest owed on the loan.”

Therefore, the court ruled that it is reasonable for Revlon’s lenders to believe that the payments were not made in error.

“Citibank is one of the most advanced financial institutions in the world. Therefore, defendants and their clients can assume – and already assume – that the bank has effective internal controls in place to prevent material errors,” the decision states.

Citigroup said it plans to appeal the decision.

Myrtle Frost

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